Imagine that Portugal, Italy, Ireland and Spain might all want the same debt forgiveness
"haircut" that Greece just got . . .
Friday, October 28, 2011
Saturday, October 22, 2011
I You Don't Understand "Derivatives" You Should . . .
The Coming Derivatives Crisis That Could Destroy The Entire Global Financial System
Most people have no idea that Wall Street has become a gigantic financial casino. The big Wall Street banks are making tens of billions of dollars a year in the derivatives market, and nobody in the financial community wants the party to end.
Most people have no idea that Wall Street has become a gigantic financial casino. The big Wall Street banks are making tens of billions of dollars a year in the derivatives market, and nobody in the financial community wants the party to end. The word "derivatives" sounds complicated and technical, but understanding them is really not that hard. A derivative is essentially a fancy way of saying that a bet has been made. Originally, these bets were designed to hedge risk, but today the derivatives market has mushroomed into a mountain of speculation unlike anything the world has ever seen before. Estimates of the notional value of the worldwide derivatives market go from $600 trillion all the way up to $1.5 quadrillion.
Keep in mind that the GDP of the entire world is only somewhere in the neighborhood of $65 trillion. The danger to the global financial system posed by derivatives is so great that Warren Buffet once called them "financial weapons of mass destruction". For now, the financial powers that be are trying to keep the casino rolling, but it is inevitable that at some point this entire mess is going to come crashing down. When it does, we are going to be facing a derivatives crisis that really could destroy the entire global financial system.
Tuesday, October 18, 2011
Bank of America to Charge Their Trillion$$ in Fraud to Your Account?
Bank of America is preparing to offload it's trillions in derivative liabilities off on to the taxpayers thru the FDIC.
Where are the investigations? Where are the government regulators who reject such fraudulent conduct? Where are the prosecutions for the trillions that have been stolen from are earnings and savings to bail out those who created the global meltdown?
Where are the investigations? Where are the government regulators who reject such fraudulent conduct? Where are the prosecutions for the trillions that have been stolen from are earnings and savings to bail out those who created the global meltdown?
Thursday, October 13, 2011
Largest 6-Week Dump of US Treasuries in History
From ZeroHedge:
Over the weekend, we observed the perplexing sell off of $56 billion in US Treasurys courtesy of weekly disclosure in the Fed's custodial account (source: H.4.1) and speculated if this may be due to an asset rotation, under duress or otherwise, out of bonds and into stocks, to prevent the collapse of the global ponzi (because when the BRICs tell the IMF to boost its bailout capacity you know it is global). We also proposed a far simpler theory: "the dreaded D-day in which foreign official and private investors finally start offloading their $2.7 trillion in Treasurys with impunity (although not with the element of surprise - China has made it abundantly clear it will sell its Treasury holdings, the only question is when), has finally arrived." (. . . more)
Over the weekend, we observed the perplexing sell off of $56 billion in US Treasurys courtesy of weekly disclosure in the Fed's custodial account (source: H.4.1) and speculated if this may be due to an asset rotation, under duress or otherwise, out of bonds and into stocks, to prevent the collapse of the global ponzi (because when the BRICs tell the IMF to boost its bailout capacity you know it is global). We also proposed a far simpler theory: "the dreaded D-day in which foreign official and private investors finally start offloading their $2.7 trillion in Treasurys with impunity (although not with the element of surprise - China has made it abundantly clear it will sell its Treasury holdings, the only question is when), has finally arrived." (. . . more)
Tuesday, October 11, 2011
U.S. Senate Launches Trade/Currency War with China (our largest creditor)
Now if this doesn't get your attention, nothing will. (Click here for the full story of our Senate, led by that genius Harry Reid who just provoked a DefCon 2 trade and currency war with China who just happens to be our largest creditor. Nice job, Harry!)
Monday, October 10, 2011
A Recession by any other Name Still Smells . . .
From the New York Times:
WASHINGTON — In a grim sign of the enduring nature of the economic slump, household income declined more in the two years after the recession ended than it did during the recession itself, new research has found.
Between June 2009, when the recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7 percent, to $49,909, according to a study by two former Census Bureau officials. During the recession — from December 2007 to June 2009 — household income fell 3.2 percent. (. . . more)
WASHINGTON — In a grim sign of the enduring nature of the economic slump, household income declined more in the two years after the recession ended than it did during the recession itself, new research has found.
Between June 2009, when the recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7 percent, to $49,909, according to a study by two former Census Bureau officials. During the recession — from December 2007 to June 2009 — household income fell 3.2 percent. (. . . more)
Friday, October 7, 2011
10 Yrs of Pres. Obama's "Millionaire Tax" would only Plug 4 Months of Fed Overspending.
From Zero Hedge:
In order to keep the ongoing class warfare waged by the administration in perspective, today the CBO was kind enough to score the revenue impact of the proposed and much debated Buffett Tax, now appearing in non-populist literature as "Surtax on Millionaires." According to the Budget Office, said tax which is the source of substantial consternation among the population, would generate, over the next decade, a grand total of... drum roll... $453 billion. Why the drum roll? Because as we pointed out a few days ago, the US closed the 2011 fiscal year having added $1.23 trillion in debt (a number which would have been $1.4 trillion absent some year end settlement gimmickry). In other words, last year the US government had on average a $100+ billion deficit each month. In yet more other words, the great populist gimmick that is the Buffett Tax will have the great benefit of generating, between 2011 and 2021 enough money to plug a debt hole, at the rate America currently spends money, of 4 months.
(. . . more)
In order to keep the ongoing class warfare waged by the administration in perspective, today the CBO was kind enough to score the revenue impact of the proposed and much debated Buffett Tax, now appearing in non-populist literature as "Surtax on Millionaires." According to the Budget Office, said tax which is the source of substantial consternation among the population, would generate, over the next decade, a grand total of... drum roll... $453 billion. Why the drum roll? Because as we pointed out a few days ago, the US closed the 2011 fiscal year having added $1.23 trillion in debt (a number which would have been $1.4 trillion absent some year end settlement gimmickry). In other words, last year the US government had on average a $100+ billion deficit each month. In yet more other words, the great populist gimmick that is the Buffett Tax will have the great benefit of generating, between 2011 and 2021 enough money to plug a debt hole, at the rate America currently spends money, of 4 months.
(. . . more)
Thursday, October 6, 2011
Most Serious Financial Crisis in History?
Sir Mervyn King was speaking after the decision by the Bank’s Monetary Policy Committee to put £75billion of newly created money into the economy in a desperate effort to stave off a new credit crisis and a UK recession.
Economists said the Bank’s decision to resume its quantitative easing [QE], or asset purchase programme, showed it was increasingly fearful for the economy, and predicted more such moves ahead.
Sir Mervyn said the Bank had been driven by growing signs of a global economic disaster.
“This is the most serious financial crisis we’ve seen, at least since the 1930s, if not ever. We’re having to deal with very unusual circumstances, but to act calmly to this and to do the right thing.”
(. . . more)
When Politicians Realize they Can Bribe the People with Their Own Money
Families were more dependent on government programs than ever last year.
Nearly half, 48.5%, of the population lived in a household that received some type of government benefit in the first quarter of 2010, according to Census data. Those numbers have risen since the middle of the recession when 44.4% lived households receiving benefits in the third quarter of 2008.
- Click for full-size image
The share of people relying on government benefits has reached a historic high, in large part from the deep recession and meager recovery, but also because of the expansion of government programs over the years. (See a timeline on the history of government benefits programs here.)
(. . . more)
We're Just Now Learning that the Fiscal Cancer of 2008 wasn't Cured by Monetary Lortab . . .
From Zero Hedge:
In an interview with IMF advisor Robert Shapiro, the bailout expert has pretty much said what, once again, is on everyone's mind: "If they can not address [the financial crisis] in a credible way I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system. We are not just talking about a relatively small Belgian bank, we are talking about the largest banks in the world, the largest banks in Germany, the largest banks in France, that will spread to the United Kingdom, it will spread everywhere because the global financial system is so interconnected. All those banks are counterparties to every significant bank in the United States, and in Britain, and in Japan, and around the world. This would be a crisis that would be in my view more serrious than the crisis in 2008.... What we don't know the state of credit default swaps held by banks against sovereign debt and against European banks, nor do we know the state of CDS held by British banks, nor are we certain of how certain the exposure of British banks is to the Ireland sovereign debt problems." (. . . more)
In an interview with IMF advisor Robert Shapiro, the bailout expert has pretty much said what, once again, is on everyone's mind: "If they can not address [the financial crisis] in a credible way I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system. We are not just talking about a relatively small Belgian bank, we are talking about the largest banks in the world, the largest banks in Germany, the largest banks in France, that will spread to the United Kingdom, it will spread everywhere because the global financial system is so interconnected. All those banks are counterparties to every significant bank in the United States, and in Britain, and in Japan, and around the world. This would be a crisis that would be in my view more serrious than the crisis in 2008.... What we don't know the state of credit default swaps held by banks against sovereign debt and against European banks, nor do we know the state of CDS held by British banks, nor are we certain of how certain the exposure of British banks is to the Ireland sovereign debt problems." (. . . more)
Wednesday, October 5, 2011
100% Debt to GDP DEAD Ahead . . .
From Zero Hedge:
Little to say here: total debt is now at, obviously, a new record high of $14,856,859,498,405.73, which is a $20 billion increase overnight, $67 billion in the past two days, and $162 billion in the last three days. We will repeat the last part:total US debt has increased by $162 billion in three days. Said otherwise, total US Debt/GDP is now 98.9%. Please carry on.
Little to say here: total debt is now at, obviously, a new record high of $14,856,859,498,405.73, which is a $20 billion increase overnight, $67 billion in the past two days, and $162 billion in the last three days. We will repeat the last part:total US debt has increased by $162 billion in three days. Said otherwise, total US Debt/GDP is now 98.9%. Please carry on.
It's All Greek to US as BK Countdown Begins
By ELENA BECATOROS and MENELAOS HADJICOSTIS Associated Press
ATHENS, Greece (AP) - Greece has enough money to pay pensions, salaries and bondholders through mid-November, the finance minister said Tuesday, as global markets sank on worries that a messy default could bring down European banks and trigger another global recession. . . .
"We're at the worst moment under the worst conditions. We're dependent on the help and lending of our institutional partners," Venizelos said.
"We have to make a super-human effort to win this wager of our times. There was this false sense of a standard of living that we, ourselves created," the minister stressed. "What's important now is to protect the country and to make clear and final decisions."
Regulating Rates Higher in the Midst of Recession . . . Really?
From Alaska to Georgia and Wyoming to Florida, utilities are seeking permission to pass on hundreds of millions of dollars in new charges to customers to help upgrade aging infrastructure and build new or retrofitted power plants that comply with tougher environmental regulations, a Daily Beast review of regulatory filings has found.
The influx of requests, many still pending before state regulators, has left energy experts convinced that electricity prices will be on the rise for the foreseeable future as the industry struggles to modernize its aging infrastructure. (. . . more)
The influx of requests, many still pending before state regulators, has left energy experts convinced that electricity prices will be on the rise for the foreseeable future as the industry struggles to modernize its aging infrastructure. (. . . more)
Tuesday, October 4, 2011
Derivative Liability Dwarfs Debt
From USAWatchdog.com
. . . the Fed doled out $16 trillion in the wake of the credit crisis of 2008. This is an enormous sum that is greater than the all goods and services produced in the U.S. in a single year. Domestic banks and companies got the money, right along with foreign banks and companies. In effect, the Federal Reserve bailed out the world financial system. Now, we are right back to square one facing another financial meltdown with European banks and sovereign debt. If the Fed spent $16 trillion, why in the heck is this problem not fixed and why isn’t the world economy taking off like a rocket?” The simple answer is it wasn’t enough money.
The Bank of International Settlements pegs the total world over-the-counter (OTC) derivative exposure at around $600 trillion, but many experts say the real figure is more than twice that amount. No matter which figure you use, it is a gargantuan sum. OTC derivatives are an unregulated dark pool of money with no public market. These are basically debt bets between two entities on things such as credit risk, currencies, interest rates and commodities. According to the latest report from the Comptroller of the Currency, just four U.S. banks have an eye popping $235 trillion of OTC derivative leverage. (Click here for the complete Comptroller of the Currency report.) As a nation, U.S. banks have a total OTC derivative exposure of $250 trillion. So, the fact that just four U.S. banks have this much leverage and risk is astounding!
(. . . more)
Monday, October 3, 2011
14 Daunting Financial Facts
On both sides of the Atlantic, the big banks are highly leveraged, they have taken on a ton of risk and they are very deeply exposed to derivatives. It is as if virtually nobody learned any lessons during the financial crisis of 2008. Once again we are facing a situation where if a couple of financial dominoes fall it could send dozens of others tumbling to the ground.
Some very significant things happened on Monday. But the media has gotten so used to reporting on tremendous financial instability that Monday's events mostly got brushed to the side. Instead, Amanda Knox captured most of the headlines.
But the reality is that some really, really monumental stuff has been going down.
The following are 14 facts that just might scare the living daylights out of you....
#1 On Monday, the Dow was down 258 points. Lately it seems as though the Dow has been going up or down by several hundred points almost every single day, and that much volatility is not a good sign for the health of the financial system.
#2 Shares of Wall Street banking giant Morgan Stanley fell by another 8 percent on Monday. Overall, shares of Morgan Stanley have declined by more than 50 percent since February.
What Happens when a Desperate Debtor Picks a Fight with its Number 1 Creditor?
From Zero Hedge on the madness of the Senate picking a fight with our Number 1 Creditor:
The Senate finally did it and fired the first round in the great US-China currency war, after they took aim at one of China's core economic policies, voting to move forward with a bill designed to press Beijing to let its currency rise in value in the hope of creating U.S. jobs. As Reuters reports, "Senators voted 79-19 to open a week of Senate debate on the Currency Exchange Rate Oversight Reform Act of 2011, which would allow the U.S. government to slap countervailing duties on products from countries found to be subsidizing their exports by undervaluing their currencies. Monday's strong green light for debate on the bill bolsters prospects it will clear the Democrat-run Senate later this week, but prospects for action in the Republican-controlled House of Representatives are murky. If the bill did clear both chambers, it would present President Barack Obama with a tough decision on whether to sign the popular legislation into law and risk a trade war with Beijing, or veto it to pursue a more diplomatic approach." The response has been quick and severe: "China's foreign ministry said it "adamantly opposes" a bill pushed by the U.S. Senate that will allow the United States to impose duties on countries that undervalue their currencies." And just because China is now certain that the US will continue with its provocative posture, most recently demonstrated by the vocal response in the latest US-Taiwan military escalation, we would not be surprised at all to find China Daily report that China has accidentally sold a few billions in US government bonds... just because.
The Senate finally did it and fired the first round in the great US-China currency war, after they took aim at one of China's core economic policies, voting to move forward with a bill designed to press Beijing to let its currency rise in value in the hope of creating U.S. jobs. As Reuters reports, "Senators voted 79-19 to open a week of Senate debate on the Currency Exchange Rate Oversight Reform Act of 2011, which would allow the U.S. government to slap countervailing duties on products from countries found to be subsidizing their exports by undervaluing their currencies. Monday's strong green light for debate on the bill bolsters prospects it will clear the Democrat-run Senate later this week, but prospects for action in the Republican-controlled House of Representatives are murky. If the bill did clear both chambers, it would present President Barack Obama with a tough decision on whether to sign the popular legislation into law and risk a trade war with Beijing, or veto it to pursue a more diplomatic approach." The response has been quick and severe: "China's foreign ministry said it "adamantly opposes" a bill pushed by the U.S. Senate that will allow the United States to impose duties on countries that undervalue their currencies." And just because China is now certain that the US will continue with its provocative posture, most recently demonstrated by the vocal response in the latest US-Taiwan military escalation, we would not be surprised at all to find China Daily report that China has accidentally sold a few billions in US government bonds... just because.
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